TARP Corps. Owe More Than $220M in Back Taxes

March 19, 2009— -- At least 13 companies who have received some of the $300 billion in TARP funds owe hundreds of millions of dollars in back taxes, it was revealed today.

Two of the companies owe more than $100 million in taxes, said Rep. John Lewis, D-Ga., chairman of the House Ways and Means Subcommittee on Oversight.

Altogether, the 13 companies owed the government more than $220 million in unpaid taxes, he said.

"This is shameful. It is a disgrace," Lewis said at the beginning of a hearing into how the TARP money is being spent.

Lewis' committee discovered the unpaid taxes in a review of tax records from 23 of the firms receiving the most money, Lewis said.

"If we looked at all 470 recipients, how much would they owe?" Lewis asked.

He didn't identify the companies or indicate how much TARP money they have received. But some of the corporations that have received the largest chunks of TARP cash include AIG, Bank of America, Citigroup, General Motors and Chrysler.

So far, Treasury has allocated $300 billion of the TARP money that was authorized by the Bush administration. It is preparing to allocate a second $300 billion by the Obama administration.

The Georgia lawmaker said the subcommittee learned of the unpaid taxes from IRS records. He said these firms were required to sign contracts that they did not have any unpaid taxes, but the Treasury Department never requested the tax records.

"This entire program is based on trust -- trust in the giver and trust in the taker," Lewis said.

Neil Barofsky, special inspector general for TARP, told the hearing he plans on discussing the unpaid taxes with the Office of Financial Stability "to remedy the situation."

If an executive knowingly signed the contracts knowing that their statement on taxes was false, "that would potentially be a crime," Barofsky said. "We are going to look very heavily into this."

The issue of companies that owe millions in taxes getting massive amounts of federal help is the latest in a series of issues that have embroiled federal attempts to bail out the economy.

Companies have been forced by public outrage and federal pressure to cancel lavish corporate retreats and limit or eliminate executive bonuses. Outrage over bonuses have embroiled the beleaguered insurance giant AIG.

Barofsky Targets Bank of America

Barofsky said his office is launching an audit to find out "who knew what, how, when and why," and is coordinating with the Department of Justice to find out if it is possible to recover the AIG bonuses.

"Preliminary information we have seen indicates that the TARP contract between AIG and Treasury that was entered into back in November specifically contemplated the payment of bonuses and retention payments to AIG employees, including AIG's senior partners," Barofsky said.

Some AIG executives have volunteered to return the money.

The inspector general has warned that the spending of so much money in such a short time is ripe for fraud, abuse and corruption. He said he has two investigations under way.

"We are looking into the impact of outside influences on the TARP application process, andwe will report back to Congress on our finding as to what impact, if any, that lobbyists or other outside influences have had," Barofsky said.

"Second, we have begun an audit into the process under which Bank of America received $45 billion in capital investment and is to receive a guarantee relating to approximately $100 billion of toxic assets in four separate TARP transactions under three different TARP programs," he said.

Barofsky said, however, that he was having trouble staffing his office, partly because it is a temporary agency and there are restrictions on pay and on conflict of interest rules. Many of the potential employees have worked for companies that would be targeted for oversight or have a financial interest in those companies, he said.